Tuesday 21 January 2020

Cerberus firm's €2.5k tax bill on €5.6bn Project Eagle portfolio

Company is just one of many who have minimised tax by availing of Section 110 tax status, writes Ronald Quinlan

Nama chief executive officer Brendan McDonagh
Nama chief executive officer Brendan McDonagh
Ronald Quinlan

Ronald Quinlan

A special purpose vehicle established to hold and manage Nama's €5.6bn par value Project Eagle loan book following its sale to US private equity giant Cerberus paid taxes of just stg£1,947 (€2,500) in 2014 - by availing of controversial Section 110 tax status.

The startling number is contained in the latest available accounts for Promontoria Eagle, the company set up on behalf of Cerberus by Dublin-based Structured Finance Management Ireland to recover the debt it acquired from Nama for the knockdown price of €1.6bn.

A further examination of Promontoria Eagle's accounts shows that the company collected repayments of just over stg£73.18m from the date of its incorporation on April 17, 2014 to December 2014.

The financial statements show net interest income of stg£49.98m and other operating income of stg£1.15m. Once impairment charges of stg£5.47m, losses on derivatives of stg£2.58m, and operating expenses of stg£43m were deducted, profit for the period came to stg£7,788 before taxation. The company recorded a profit on its ordinary activities after taxation of stg£5,841.

While news of Promontoria Eagle's use of Section 110 will invariably serve to fuel the growing public and political disquiet over the success of international investment funds in minimising tax paid on the distressed loan portfolios acquired in Ireland during the financial crisis, the practice is entirely legitimate and was actively promoted by government and the country's professional service sector.

Section 110 of the Taxes Consolidation Act 1997 is regarded as the cornerstone of Ireland's onshore debt-securitisation regime.

The vehicle allows investors to acquire, manage and trade in a vast range of assets (including securities, aircraft, financial assets and non-performing loans such as mortgages) in a tax-neutral manner. The law was extended five years ago to include a broader range of 'qualifying assets', such as commodities and carbon offsets.

Qualifying Irish tax-resident SPVs can lawfully engage in an extensive range of financial and leasing transactions in a tax-neutral manner.

As long as payments out match payments in, S110 securitisation vehicles pay virtually no tax, if any.

Sunday Indo Business

Also in Business